1. Saratoga Creating Credibility and Organizational Value Launching and Managing your Strategic HR Scorecard Wisconsin Society for Human Resource ManagementOctober 12, 2006

2. Special Thanks Jeff Hackel Veridian Homes Laura Jaggi North Central Management Vicki Kampmeier TDS Lee Wiersma UW Credit Union Diane Rivers Berbee Information Services Jodi Chandler First Business Financial Claudio Diaz Wipfli LLP Jane Lindebak Home Savings Bank Scott Pollak PwC Saratoga Jim Ellis PwC Saratoga It is with great gratitude and humility that I thankthese leaders and organizations for theirfaith, dedication & sacrifice. Without it, this project would not have succeeded. Dan Loichinger, CMC 3. Todays Agenda 10 Minutes

Questions & Answers

15 Minutes

Lessons Learned

Presenter Biographies

15 Minutes

HR Value Proposition

30 Minutes

Tools & Methods

10 Minutes

Readiness Assessment

10 Minutes

Introductions / Background

4. Background

Eight Madison-area organizations worked on a Strategic HR Measurement and Development project with executives in their respective organizations

Today we will use the experiences from that project to discuss launching and managing a Strategic HR scorecard, covering:

• How the project was conceived, formed and executed

• Key concepts from initial GMA SHRM presentation

• Methodologies and tools used in the project

• Participant reactions and key points to share with peers

• Lessons learned

5. Background Project Development

The Strategic HR Measurement and Development project began with a GMA-SHRM presentation on human capital measurement

Concurrently, a local Human Capital Alliance (HCA) was established with the charter of better understanding strategic HR metrics

After further discussions, a few key HCA members agreed to become Steering Committee members to launch the Strategic HR Measurement and Development initiative

An orientation session was held to gain interest and commitment of additional participants

Three workshops were designed and executed over a three month period in early 2006

6. Background Multi-Client Challenges

• Varied metrics that are important to each organization

• Differing strategies and people drivers

• Multiple perspectives on target setting and additional layers of intended audiences

75 thpercentile Median 25 Percentile $66,180 $1,253 60:1 $80,143 $1,610 92:1 $92,288 $2,211 111:1 Industry Benchmarks Median $1,359 HR Expense per FTE Median $ 91,028 HR Labor Cost per HR FTE Median 122:1 HR Headcount Ratio Target Company XResults 7. Background Line of Sight: Strategy to Metric Develop a nimble workforce with reach Develop a succession plan for sustainable workforce Become an Employer of Choice and improve employer reputation Metrics Revenue per FTE Poor Quality Hire Rate Human Capital ROI Voluntary Separation Rate Compa Ratio Average Tenure People Drivers Business Strategies Increase Worker Productivity Drive World Class Hiring Practices Align Workforce To Goals Develop the Leaders of the Future Invest in Employee Training Control Expenses Engage Employees Pay Employees AppropriatelyDevelop Culture Bench Strength Training Cost Factor Labor Cost As a Percent of Revenue People Strategies To Meet Requirement Grow the Business Improve Profitability Greater Market Agility and Responsiveness 8. Background GMA SHRM Presentation: The Role of HR Measurement

• Provide a common language to:

• • Develop working relationships w/business partners

• • Set expectations

• • Communicate results

• Provide an objective means to:

• • Communicate financial impact of investments organizations human capital

• • Quantify return on investments in the Human Resources function

• Provide comparisons:

• • Over time

• • Best practices internally

• • Gives an idea of what is and what may not be possible for your organization

9. Background GMA SHRM Presentation: The Benefits of Effective HR Measurement

• Enables HR to address ways to deliver services that are better, smarter, faster, cheaper

• Provides details executives want to know on where you stand relative to peer group

• Allows HR to gain support for strategic value-added services (succession planning, performance management, leadership development etc.)

• Helps to align priorities and resources to directly support the companys ever-changing business initiatives & workforce requirements

10. Background GMA SHRM Presentation: Optimizing HRs Role Optimal HR Organization Performance Requires Strategic Alignment Configuring HR to deliver high value services, practices and programs that meet business and human capital needs HR Service Delivery Strategy Practices Services Programs Human Capital Strategy Business Objectives Prioritizes Supports Drives Executes Where HR focuses a majority of its effort 11. Background GMA SHRM Presentation: Decision Guidance Model Talent Optimization Workforce Engagement Workforce Analytics HR Service Delivery Effectiveness HR Customer Satisfaction Process Efficiency & Cost Effectiveness Survey Metrics HR Program Effectiveness Program Satisfaction Total Program Costs By linking opinions to outcomes we can identify the leading indicators to future outcomes 12. Workforce Workforce Engagement Survey Workforce Analytics Metrics

Turnover drivers in our organization are

Supervisor

Opportunity

Compensation

Voluntary turnover in our organization is22% And costs us $17 M Background GMA SHRM Presentation: Decision Guidance Model 13. Background GMA SHRM Presentation: Decision Guidance Model Workforce Process Efficiency & Cost Effectiveness Workforce Analytics

Workers show

Low Revenue/ Employee

High Turnover Rate

Training investment per employee Is 25 percentile orlower HR Delivery Metrics 14. Readiness Assessment Saratoga 15. Madison HCA Measurement Overview Managing and Communicating Results Gaining Buy-in Business Case for Measurement Utilizing Scorecards

Defining scope of measurement

Determining return on measurement investment

Assessing risks to successful measurement programs

Identifying resources for measurement

Confirming organizational goals and strategies

Confirming senior leaderships expectation of HR

Seeking input on key metrics

Beginning stakeholder change management process

Develop line of sight from business strategy to HR

Link Metrics to Strategy

Define effective vs. ineffective metrics

Evaluate standard vs. non-standard metrics

Move to data collection

Avoiding common pitfalls

Including analysis of results along with metrics

Setting Targets

Managing multiple scorecards

Considering next generation of metrics

16. Opening Thought:All Eyes Are on HR The average organization invests 28 in compensation and benefits to get $1 in revenueRE T U R N ? 17. Conducting Stakeholder Assessments How Done Today IT HR UsersLine Users Line General Management Executives Risks to Changing How Can be done Better What are the educational requirements Information Requirements Stakeholder Group 18. Tools and Methodologies Saratoga 19. Making a Business Case

• Define objective/initiative/issue

• List out assumptions

• Estimate revenue generated/preserved/costs saved

• Costs to achieve (hard and soft)

• Who will execute

• Timeframe

• Probability of success

Business Case Measurement Return Deliverables Resources Risks 20. Measurement Return Workforce and HR Measurement leads to three types of improvements: HR Efficiency HR Effective-ness Workforce Improvement Magnitude of Improvement Line and Executive Interest 21. Measurement Deliverables Samples include Technology, Change management, etc. Weekly/Bi-weekly Web-based portal & application Deliver near-real time data to line management Workforce Scorecard Support business strategies Ad hoc as needed Tables and analysis Assess Hiring Sources Hiring Strategy Review Leadership commitment and follow through on results Monthly Hardcopy Spreadsheet Review at HR Leadership meetings HR Scorecard Annually Frequency Numbers support text, analysis and findings Hard and Soft copy report Annual presentation to Board on workforce investment Corporate People Report Support Media Purpose Deliverable Name 22. Measurement Risks Our Number Paradox Anyone thats developed a number views it as fluid, dynamic, Works in Progress But Anyone that views a number considers it the Rock of Gibraltar

Give yourself enough time to review/reflect on the results

Socialize the results in draft form

Seek feedback.Work in ever enlarging circles, starting with friendlies and moving toward influential

Develop the story.The story is what you communicate.Numbers support the story.

23. Measurement Resources People Systems Information Consultants Individual contributor, (half time?) Director and Team Existing Reporting Team Running queries on existing systems and export to excel Develop a cube Data Warehouse and Implementation Saratoga or Other subscriptions Survey normative databases Associations/Consortiums Training/Conferences/Events Project Management Analysis & Communications Training/Change Management 24. Strategies - Definition Business Strategies People Strategies Business Strategies People Strategies Need to Leverage(i.e. copy)existing language and documentation The overall plan that drives actions to achieve business objectives for an organizationAn organizations overall plan for its human capital (workforce) that identifies areas to execute business strategies and achieve business objectives Select the top two to four strategies most critical 25. Strategies Sample Business Strategies Business Strategies People Strategies Sample Business Strategies Need to Leverage(copy)existing language and documentation Improve Profitability/ Shareholder return Grow Revenue Control Costs Improve Customer Service/ Satisfaction Develop New Products Expand Geographically Acquire and Merge New Businesses Improve Safety Improve Leadership/ Business Sustainability 26. Strategies Sample People Strategies Business Strategies People Strategies Sample People Strategies Need to Leverage(copy)existing language and documentation Attract the Right Talent Retain the Right People Reward Appropriately for Both Company and Employee Develop Talent Run HR Like a Business Leadership Development Develop a Culture Engage the Workforce Manage Performance 27. People Drivers The Bridge Between Strategies andHR Interventions People Drivers People Drivers

People Drivers are outcomes of HR interventions (plans, programs, activities, etc.) that attempt to achieve the strategies

People Drivers are not theinterventionthemselves

• For example improve communications between staffing and the line might bean intervention

• to achieve the people driver of Drive World Class Hiring practices

Measuring people drivers will let you know if you are achieving your strategies

• Measuring the strategies is too high level

• Measureinterventionsthemselves is too in the weeds

Quite likely your organization may have three or fourinterventionsunderway to support each people driver

While drivers may apply to multiple strategies, pleasefocus ononly the most applicable/ critical drivers in your organization

Increase Worker Productivity Drive World Class Hiring Practices Align Workforce To Goals Develop the Leaders of the Future Invest in Employee Training Control Expenses Engage Employees Pay Employees AppropriatelyDevelop Culture 28. Measure People Drivers, notInterventions Develop a nimble workforce with reach Metrics People Drivers Revenue per FTE Increase Worker Productivity Poor Quality Hire Rate Successful Hiring Practices Human Capital ROI Align Workforce To Goals People Strategies To Meet Requirement Intervention Develop a workforce planEvaluate Low Performer Strategy Implement a Coaching Program Process Map to Improve Line/ HR communications Implement Applicant Tracking System Optimize Source of Hire Evaluate Compensation Strategy Implement a Performance Management System 29. Participant Feedback Saratoga 30. Participant Quotes The workshop series presented by PwC & Saratoga on strategic HR measurement and development has been phenomenal.The presenters have facilitated a systematic process of assessing the business climate and strategic initiatives of our company and then delivered the tools to create measures.The tool has a cascading effect starting with the overall business strategies, moving to the people strategies, then linking to people drivers, and finally ending with the applicable measures.I highly recommend this workshop series to any organization looking to enhance their measurement practices.Jeff Hackel, Vice President, Human Resources 31. Lessons Learned Saratoga 32. Key Findings Successful Initiatives

Align the HR effort with the organizations strategic direction & sponsorship.

Temporarily set aside your existing data streams and measures.

Assess the needs and input of each stakeholder, e.g. risks, info needs, etc.

• Establish a strong alliance with your financial executive

• Determine how to best communicate, display & discuss with others

Partner with other HR executives outside your company dont do it alone.

Plan the organization effort needed to support & enable the planned changes:

• Key communication vehicles to various stakeholders

• Managing change & dropping non-value added work activities

• Use yourself, or another capable staff person to manage the project

• Allow time & effort to analyze, discuss & learn from data coming in

Continue improvement efforts on a systemic and team basis ROI will come.

33. Key Findings - Metric Selection Discussions

Distinguish among context metrics, input metrics and outcome metrics

• Focus on outcome metrics

• Input or context metrics can be used for other purposes

Down-select metrics

• Determine priority to the organization & managements definitions of metric

• Assess ability to collect the data & who else can provide relevant data

Eliminate redundant metrics or choose best fit between similar ones

Utilize survey measures sparingly

Do not eliminate certain metrics because the data doesnt yet exist

Consider high priority but tough to collect metrics for future versions

• Develop business case for automation / collection efforts

• Develop business processes for gathering data points of interest

*Remember that one metric can address multiple drivers within your scorecard

34. Communicating Results - Messaging

• Background of initiative

• The story around the results

• Results including business impact

• Link to business strategies

• What should be done with the information

• How to interpret comparative information

Determine the right message to be conveyed with the measurement information that addresses: 35. Communicating Results - Timing

• Board Meetings

• Quarter-end Reporting

• Executive Team / Leadership Meetings

• Annual Budgeting

• Strategic Planning

• Customer Satisfaction Studies

• Operational Reviews

Measurement should be delivered on a frequency that provides necessary information to the audience as required.Ideally, this information will coincide with broader measurement efforts such as: 36. Communicating Results Avoiding Pitfalls

Data should be used as support for what you know not an aha-- but watch out for the aha

Bring draft action plans to leadership meetings to get their buy-in

Ask others what they see in the data

• No Story

• • Lack of Causal Analysis

• • Lack of Action Plans

• • Results are Inconsistent w/Actions

Seek buy-in on the dashboardhold an internal session like the ones we have here

Focus on the business impacts

Stay on Message

Stay on Message

Assess whether there is a case to redesign underlying business processes

• Change Management

• • Lack of Management Understanding of Importance

• • No Buy in on Dashboard

• • Underlying Business Processes Dont Support Metrics

Assess alignment developed in these workshops with stakeholders

Get help w/data collection (from finance?)

Continue stakeholder assessments after delivery

• Content

• • Dashboard Misaligned to Strategy

• • No Time to Analyze Results Too Much Information

• • Too Frequent to Digest/ Review

Develop a strategy for assessing data quality, accuracy

Work with drafts

Find out what data other people use

Calculate the impact

• Data

• • Data is Wrong

• • Multiple Versions of the Truth

• • No Link to Impact

37. Presenter Biographies

Dan Loichinger, CMC: [email_address] 608.354.3524

• Dan Loichinger is a certified management consultant with The Covenant Group, an executive development and OD firm based in Madison, Wisconsin. Dan serves as a catalyst and executive advisor when helping to create market-leading organizations with sustainable and profitable growth organizations where passion and results naturally co-exist.

• Dans experience spans over two decades. He has led training and consulting organizations in several industry sectors, successfully launched a training company, served as a senior organization effectiveness consultant for professional service firms, and owned his own management consulting firms.

• In addition to his corporate and consulting experience, Dan has led training associations, presented at conferences across the United States, facilitated programs through UW Madisons Executive Education Center, and judged forCorporate ReportsWorkplace of Distinction process

Jim Ellis: [email_address] 312.298.2104

• Jim Ellis is a Manager with PricewaterhouseCoopers HR Services Practice in the Chicago office.Jim has over 12 years of professional experience in consulting with organizations on a broad variety of human resource issues.His area of expertise is in HR organization, strategy and delivery.

• Jim is a market champion for the Saratoga (formerly Saratoga Institute) workforce diagnostics system and strategic human capital measurement consulting, and he has worked with Saratoga's leadership and succession planning advisory services in the areas of leadership assessment and assimilation training.

• He has also presented to SHRM and a variety of other conferences.

38. Saratoga